Tom Melhuish 5 min read

What is the VAT on your business water bill?

Nearly all businesses use water every day and receive water bills regularly, but have you ever considered if you’re paying VAT on your business water bill?

In this article, we have a look into what VAT is, if there is VAT on water bills, and how you can ensure you are paying the correct rate of VAT.

What is VAT?

VAT is a value-added tax. VAT is a consumption tax that is placed on a product at every stage of the supply chain where value is added. The amount of VAT that a business pays is on the sales price of their product, less any of the costs of materials used in the product that has already been taxed.

Is there VAT on your business water bill?

VAT on your business water bill is usually applied to businesses involved in engineering, manufacturing, and construction.  These businesses use water as a direct input in their production making it taxable.

What types of businesses are charged VAT on their water bills?

The types of businesses that are charged VAT on their water bills are businesses that fall into the 1-5 divisions of the Standard Industry Classifications.

The top industries that fall into this category are:

  • Utilities
  • Construction
  • Chemical Production
  • Food Production
  • Mining
  • Textile Production

What is a SIC code?

SIC codes are a system for classifying all types of businesses with a five-digit code. It’s a system used globally by government agencies to classify industry areas.

Companies House discloses the SIC code and description in public company records in the “nature of business” section.

Which SIC code applies to my business?

There are 600 individual SIC classifications to choose from when deciding which code applies to your business. Helpfully, Companies House has produced a searchable directory of SIC codes which helps you find which code fits best.

Even if your company is dormant (99999) or non-trading (74990), there is a SIC code for these situations.

How can I ensure I’m paying the correct VAT for my businesses water rates?

If you think that VAT is not being treated correctly, we recommend contacting your current business water supplier explaining the nature of your business and the SIC code that best applies. Your business water supplier will then be able to assess on your behalf.

How much is VAT on my business water bill?

The VAT for all industrial companies listed above is set at 20%. It’s charged at the standard rate. Businesses that are charged VAT on their business water bills will be able to recover the VAT charged by your water supplier as input VAT through their periodic VAT returns.

Will my business be charged VAT?

No, your business will not be charged VAT on your water bills, unless you are a business that falls into the industrial business sector. For example, if your business is involved in engineering, manufacturing, and construction. In VAT jargon the supply of water and wastewater services is a zero-rated supply.

If you think your supplier is incorrectly charging you VAT we recommend that you contact the customer services department of your supplier.

Bill Validation

Business water bills can be complex. At AquaSwitch, we offer a free bill validation service. We’ll review your recent water bills recalculating your charges from first principles based upon your area’s wholesale scheme of charges.

Our experts will report our findings of any discrepancies noted in your billing, any areas where historical rebates can be requested, and other recommendations to save money on your water supply.

Please refer to our guide for more information to help understand business water rates.

How can I switch my business water supplier?

Here at AquaSwitch, we can assist you with switching your business water bills with ease. The first step of the process is to compare your current water tariffs to those being offered by alternative providers.

What are the benefits of switching my business water supply?

  • Savings: By switching supplier, you can now save up to 20% on your business water bills.
  • Improved Customer Service: Benefit from improved customer experience, tailored services, and simplified bills.
  • Efficiency: Find a supplier that will help you create a more water-efficient business.

Click here to switch business water suppliers.

FAQ Section – VAT on business water bills.

Are business water rates vat exempt or zero rated?

Business water rates are a zero-rated supply for most businesses. Business water rates can be treated as a standard rated supply for businesses in the industrial sector. Please refer to our complete guide above.

Is there vat on welsh water bills?

There is no VAT on water bills for most businesses and consumers as water and wastewater services are treated as a zero-rated supply. The exception is businesses in the industrial sector charged VAT at the standard rate. Please refer to our full guide on VAT for water bills above for more information.

Compare business electricity rates.

To compare business electricity prices, simply jump to our postcode finder and begin the comparison.

Follow the simple steps above to immediately compare business electricity.